# What is UTXO?
UTXO stands for “Unspent Transaction Output,” meaning “unspent transaction output.”
This can be understood as a digital asset that has been created through previous transactions on the blockchain but has not yet been used. Taking currency as an example, UTXO is money you currently have but have not yet spent.
# How do UTXOs work?
When trading digital assets, send the desired amount using your UTXO.
UTXO used during the transaction process is lost and cannot be used again.
Additionally, since UTXO is not divided during the transmission process, You must use the entire amount at once.
If you have a UTXO larger than the amount you need to send, you will receive the remaining amount (change) after sending it. During this process, the remaining balance will be created as a new UTXO and returned to you.
[Practical example of UTXO]
Let's say you have 3 BTC and 2 BTC in your wallet, and you want to send 4 BTC to your friend.
- Step 1: To send 4 BTC to a friend, you must use the 3 BTC and 2 BTC you have.
- Step 2: During this process, 1 BTC in change will be returned to you. (Creating a new UTXO)
- Step 3: After the transaction is completed, the 2 UTXOs (3 BTC, 2 BTC) you previously had will disappear.
- Step 4: And two new UTXOs are created. (1 friend's wallet, 1 member's wallet)
# Which digital assets use the UTXO method?
UTXO is used in various digital assets such as BTC and ADA.